The American labor market by any definition remains strong and, in our estimation, stands at full employment.
The numbers tell a story of resilience The unemployment rate has ranged between 3.4% and 4.3% over the past two years. The median duration of unemployment stands at 10 weeks, with initial jobless claims remaining steady at 200,000 to 225,000 and continuing claims hovering around 1.9 million.
But there a mystery amid this encouraging data: Longer-term unemployment of greater than 27 weeks is on the rise.
Through October, 22.9%, or 1.6 million people, have experienced longer-term bouts of unemployment. That is up from a cyclical low of 1.07 million in January 2023.
Historically,, longer-term unemployment has been a function of a skills mismatch between what businesses need and what workers can do, individual challenges like addiction, the impact of globalization and varying forms of discrimination.
But those factors may not fully explain what is going on. We have consistently made the case that we do not fully understand employment dynamics in today’s economy.
Indeed, rising long-run unemployment is one of many puzzles that demand further attention.
Read more of RSM’s insights on the economy and the middle market.
The 800-pound gorilla in the room, of course, is the effect of technology on the future of the American labor market.
Although it is too early to attribute longer-run unemployment to the arrival of technologies like artificial intelligence, it is not too early to begin considering what AI will mean for workers going forward.
It is critical that as AI is integrated into the economy that it be done in a human-centered fashion that seeks to create the conditions for shared prosperity.
